Leases

12 Months Ended

Dec. 31, 2023

Leases

Leases

Note 13 – Leases

On April 28, 2023, the Company leased commercial property for its extraction facility under a commercial lease contract at a monthly lease rate of 3,000,000 COP (approximately $645) over a one-year term. The lease shall be automatically extended for another one-year period with respect to a mutually agreed upon lease rate at the time of extension. Either party can terminate the lease three months prior to the expiration of the lease term.

In addition, the Company leases its corporate offices and operational facility in Colombia under short-term non-cancelable real property lease agreements that expire within a year. The Company doesn’t have any other office or equipment leases that would require capitalization. The office lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. In the locations in which it is economically feasible to continue to operate, management expects to enter into a new lease upon expiration. The extraction facility lease contained provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. As the Company’s leases do not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

Terminated Leases

The Company leased its 12,400 square foot extraction facility under a non-cancelable real property lease agreement that commenced on January 1, 2022 and was to expire on December 31, 2027, at a monthly lease rate of 57,339,000 COP (approximately $15,290). The Company terminated the lease on September 30, 2022, resulting in termination fees of approximately $7,700. A gain of $20,148 was recognized on the early extinguishment of the lease for the year ended December 31, 2022.

On October 1, 2022, the Company entered into a five-year non-cancelable property lease, with an automatic five-year extension, for a new extraction facility with combined office space, at a monthly lease term of 29,000,000 COP plus VAT and administration fees (approximately $6,300 in the aggregate), with annual escalation of lease payments equal to the consumer price index, plus 2%. The Company terminated the lease on May 23, 2023, resulting in a gain of $3,825 on the early extinguishment of the lease for the year ended December 31, 2023.

The Company also leased a residential premise under a non-cancelable real property lease agreement that commenced on September 1, 2021 that was to expire on August 31, 2024, at a monthly lease term of 3,800,000 COP (approximately $1,013), with approximately a 3% annual escalation of lease payments commencing September 1, 2022. The Company terminated the lease on April 1, 2023, resulting in a gain of $372 on the early extinguishment of the lease for the year ended December 31, 2023.

The Company leased another residential premise under a non-cancelable real property lease agreement that commenced on June 1, 2022 and expires on May 30, 2024, at a monthly lease term of 1,900,000 COP (approximately $507), with an 8% annual escalation of lease payments commencing June 1, 2023. The Company terminated the lease on April 1, 2023, resulting in a gain of $200 on the early extinguishment of the lease for the year ended December 31, 2023.

ONE WORLD PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of lease expense were as follows:

	For the Year Ended
	December 31,
	2023		2022
Operating lease cost:
Amortization of right-of-use assets	$	34,391	$	114,907
Interest on lease liabilities		11,379		83,702
Lease payments on short term leases		1,575		23,811
Total operating lease cost	$	47,345	$	222,420

Supplemental balance sheet information related to leases was as follows:

	December 31,			December 31,
	2023			2022
Operating lease:
Operating lease assets	$	-		$	425,969
Current portion of operating lease liabilities	$	-			86,235
Noncurrent operating lease liabilities		-			341,680
Total operating lease liability	$	-		$	427,915
Weighted average remaining lease term:
Operating leases		None			4.25 years
Weighted average discount rate:
Operating lease		6.75	%		6.75	%

Supplemental cash flow and other information related to operating leases was as follows:

	For the Year Ended
	December 31,
	2023			2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	31,940		$	96,253
Early extinguishment of lease:
Lease liabilities terminated	$	395,975		$	1,438,830
Right-of use assets terminated		(391,578	)		(1,418,682	)
Gain on early extinguishment of lease	$	4,397		$	20,148
Leased assets obtained in exchange for lease liabilities:
Total operating lease liabilities	$	-		$	1,962,998

ONE WORLD PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS